I find it an irony for funds managers and investors to base investment decisions on speculation on what central banks will do should the Greek debt problem escalates into an exit from the Euro currency. A rational investor will be cautious ahead of the results of Greek parliamentary election. But stock markets rallied on Friday on expectation that central banks of many countries will pump money into their financial systems if Greece is to leave the Euro currency. This is to contain the contagion of credit seizure running through the global financial system if this is to happen.
With billions of dollars added to banks, cheap credits will be made available for businesses and consumers to take advantage of low interest to invest in higher-yielding assets. Investment in equities and other interest-yielding assets is presumably the beneficiaries in this environment.
There is fear and at the same time hope in this time. Strange but it was happening. The gung-ho people are speculating that Greece is going to be ruled by anti-austerity parliamentarians culminating in loose monetary policies by central banks the world over.
The way I see it, Greece sovereign debt problem and financial problems of Spain and Italy will not disappear overnight and monetary policy by central banks is not a panacea for resolving them. I am like many investors who had stayed by the side-line, having build up a portfolio long before this time. I am not adding new shares because the stock market has not reached low enough for me to enter the market.
Copyright © 2012, limkimtong for Living Investment
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